In what is believed to be the first lawsuit of its kind, Washington State Attorney General Bob Ferguson filed a consumer protection complaint targeting fraudulent activity on Kickstarter, the popular crowd-funding website. According to Ferguson, it’s the first time a consumer protection lawsuit involving crowd-funding.
Kickstarter is a website which allows people to pitch ideas, inventions and other products to the public, in hopes of getting people to donate funds to getting the idea off of the ground. In this case, Ed Nash collected $25,146 from 810 backers, but has failed to deliver on any his promises after two years.
Nash claimed to be trying to design a playing card game using horror cards designed by a Serbian artist. Since he reached his fundraising goal of $15,000, he was legally bound to give his backers what they paid for, which included a card set among many other things. According to the suit, Nash and his company Altius Management have not been heard from since July of 2013.
The Attorney General’s office is seeking a repayment of the funds to the more than 800 backers, and a fine of $2,000 per user, which would amount to a more than $1.6 million fine.
Backers and promoters on Kickstarter can both learn valuable lessons from this case. First, if you promise a product or a service on a crowd-funding site and people start backing you with money, you are expected to deliver on what you promised. On the other hand, investors must realize that crowd-funding is not without its inherent risks.
The outcome of this case will go a long way in setting precedent as to what protections people have on crowd-funding sites. Should Nash be let off without much penalty, it may open the door for more fraudulent activity, which may result in a lower trust level for users of all crowd-funding sites. If the courts go against Nash, future users of Kickstarter would be wise to watch what they promise.
The skilled attorneys at Posternock Apell, PC have over 120 years of combined law experience. They have made a reputation of staunchly defending the rights of consumers. If you’ve witnessed false advertisement, have been misled by promotions or have been injured through use of a product, contact us today to discuss your case and set up a free phone consultation.